In what could the second biggest corporate scandal after Satyam where Ramalinga Raju orchestrated a Rs 14,000 crore fraud, Reebok India has alleged a Rs 8,700 crore fraud by its former Managing Director Subhinder Singh Prem and former Chief Operating Officer Vishnu Bhagat.
Reebok lodged an FIR with the Gurgaon police alleging that Prem and Bhagat had ‘stolen’ products by setting up ‘secret warehouses’, fudged accounts and indulged in fictitious sales to cause a Rs 8,700 crore dent to the company. The company’s financial director, Shahim Padath, later lodged a formal complaint against the duo for siphoning off the company’s money and forging bills in the last five years. On the complaint of Shahim, stating that the duo had caused a loss of Rs 1,300 crore to the company through these irregularities, an FIR was lodged against them, police said.
The economic cell of Gurgaon police conducted a probe and found that Singh and Bhagat had allegedly rented four warehouses without informing their seniors and used them to store goods and claimed they were supplied to genuine dealers.They also allegedly siphoned off goods to ghost companies and distributors across the country, claiming they were defective pieces.
When the alleged scam came to light in March 2012, Singh, who had been made the Managing Director of Adidas India in 2011 as a part of an integration of the businesses of both Adidas and Reebok brands, was dismissed from the company. Bhagat’s services were terminated too.
The company also claimed that this fraudulent act had put at risk the jobs of around 40,000 people involved directly and indirectly in Reebok and Adidas group in India. On May 1, Adidas, which owns the Reebok brand, had said that commercial irregularities in India had forced it to take a Rs 870 crore hit in addition to restructuring spend of Rs 470 crore planned in 2012. A week later, the company filed a criminal complaint against Prem.